Hospital chain says federal probe is resolved

The hospital chain that owns San Diego's Alvarado hospital and National City's Paradise Valley says it will pay $275,000 to settle allegations that it broke federal privacy laws by publicizing a patient’s confidential hospital records in an effort to rebut a news report.

In a statement Tuesday, the Ontario, Calif.-based hospital chain said it admitted no wrongdoing in connection with the disclosures. They occurred in 2011, as Prime sought to undercut a Center for Investigative Reporting story about aggressive Medicare billing practices at the company’s Shasta Regional Medical Center in Redding.

A spokeswoman for the U.S. Department of Health and Human Services’ Office for Civil Rights said the government has not received payment from Prime and could not comment. The agency began investigating the hospital chain for violating federal patient confidentiality laws after the Los Angeles Times reported on the Redding disclosures in 2012.

Last year, the California Department of Public Health fined Prime $95,000 for the same incident, saying the hospital’s CEO had illegally sent an email to 785 people providing details of a then-64-year-old diabetes patient’s medical files. The patient had been interviewed by CIR for a story about a reported outbreak of a rare medical condition called kwashiorkor at the Redding hospital.

Federal records showed that in two years, the hospital had billed Medicare for treating more than 1,000 senior citizens for kwashiorkor, a form of malnutrition typically found among children during famines in sub-Saharan Africa.

Patient Darlene Courtois, a retired teacher’s aide, told CIR that she had been hospitalized for complications of diabetes, not malnutrition, and was never told she suffered from the ailment. She said she was overweight, not malnourished.

Nevertheless, federal records show the hospital received a $6,700 bonus payment from Medicare for treating the woman for kwashiorkor.

After a reporter called Prime for comment, the hospital targeted Courtois, state investigators found. Claiming that her confidential medical files undercut her story, hospital officials took her records to the Redding Record Searchlight in a successful effort to dissuade the newspaper’s editor from publishing a story about the case, state investigators found. Later, hospital CEO Randall Hempling sent an email to 785 people – virtually everyone who worked at the hospital – disclosing details from the woman’s files, the state investigators said.

In recent years, several Prime hospitals have reported high rates of unusual medical conditions, a CIR analysis has found. Some former Prime employees contend that the chain’s founder, has urged doctors and medical coders to pad or “upcode” computerized bills submitted to Medicare to qualify for bonus payments.

Prime insists its billings are accurate, a reflection of its concern for patient care. In January, the chain disclosed that it was facing two federal investigations: the probe of the patient confidentiality issue and a separate investigation into its Medicare billings.

“Prime Healthcare Services has now resolved one of the two federal investigations and is confident that the second one will be resolved in the near future,” it said in its statement Tuesday.